Misdirection from Crossroads GPS

Summary

A group with ties to Karl Rove sends viewers astray in a $2 million ad campaign attacking Democratic Senate candidates in Pennsylvania, California and Kentucky. The ads make badly misleading claims about the health care legislation that those Democrats supported.

An ad attacking Rep. Joe Sestak in Pennsylvania claims that "hard-hit families" will see $2,100 premium hikes. But that’s not true for the large majority, who are likely to see somewhat lower premiums, according to the very source the ad cites. Any families that do see such large premium increases are likely to also get federal subsidies to help pay them, resulting in lower cost to most of them as well.

The ad also claims that "Sestak voted to gut Medicare." That’s a wild exaggeration. It’s true that the law calls for restraining the future growth of Medicare spending by about $555 billion — about a 7 percent reduction spread over the next 10 years. And millions who now have private Medicare Advantage plans are likely to see their extra benefits reduced. But that hardly amounts to eviscerating the program.

An ad attacking California’s Sen. Barbara Boxer claims that she voted to "cut spending on Medicare benefits" by $500 billion. But Boxer didn’t vote for cuts in benefits. Rather, as we note above, the law puts restraints on the growth of future spending, mostly payments to hospitals and other providers. And that won’t necessarily lead to cuts in benefits, except for Medicare Advantage plans.

A third ad, attacking Jack Conway in Kentucky, also makes misleading references to higher taxes, Medicare cuts and higher premiums.

Analysis

Crossroads GPS, an affiliate of the conservative, Karl Rove-connected American Crossroads group, is spending more than $2 million on the three ad campaigns: $500,000 in Pennsylvania, $1 million in California and $520,000 in Kentucky, according to the group. The ads began airing last week. Crossroads GPS is organized as a 501(c)(4) under the federal tax code and thus, unlike its parent group, isn’t required to disclose its donors — though it says on its website there are "no limits" to the amount of money it will accept from U.S. corporations (or unions, for that matter). Officially, the full name of the group is Crossroads Grassroots Policy Strategies, and it says "our goal is to provide a clear road map for concerned Americans." But we find this GPS is giving bad directions.

The ad claims that the law will bring "higher insurance premiums for hard-hit families," while an on-screen graphic warns of "Insurance Premiums Additional $2100 Per Year for Families." In fact, most families are likely to see somewhat lower premiums, according to the nonpartisan Congressional Budget Office.

The ad cites as its source for this claim a Nov. 30, 2009, report from CBO. What that report actually says is that for the largest segment of the health insurance market, amounting to about 70 percent of those with coverage, "the legislation would yield an average premium per person that is zero to 3 percent lower in 2016 (relative to current law)." That’s on page 7 of the report, and it refers to those in the "large group" market — those with policies through employers who have more than 50 workers.

The CBO’s analysis isn’t much different for the "small group" market, which makes up another 13 percent of the market. For those employees who get coverage through small businesses (those with no more than 50 workers), CBO predicts "an increase of 1 percent to a reduction of 2 percent."

The only big increases that CBO predicts are for those in the "nongroup" market — which makes up about 17 percent of the overall insurance market. These are people who aren’t getting coverage through their employers or other large pools. Single individuals buying coverage would see premiums only about $300 higher than they would have been without the law, but those buying family coverage would see an average increase of $2,100 a year. (The cost would go from $13,100 under previous law, to $15,200 under the new legislation — an increase of just over 16 percent.)

But most of those buying insurance on their own would get help paying their premiums, a fact simply ignored by the ad. The CBO report says that about 57 percent of those in the nongroup market would receive federal subsidies, covering nearly two-thirds of the total premium cost, on average.

CBO: Thus, the amount that subsidized enrollees would pay for nongroup coverage would be roughly 56 percent to 59 percent lower, on average, than the nongroup premiums charged under current law. Among nongroup enrollees who would not receive new subsidies, average premiums would increase by somewhat less than the 10 percent to 13 percent difference for the nongroup market as a whole. …

Note: The CBO analysis cited by the ad is of an earlier version of the legislation. But the agency recently said that the effect on premiums of the final bill was expected to be “quite similar.”

The ‘Gut’ Feeling

Equally egregious is the ad’s claim that "Sestak voted to gut Medicare."

As we’ve noted often, the legislation doesn’t cut current Medicare spending. Rather, it reduces the growth of the program’s future spending — by $555 billion, according to CBO’s most recent estimate (the ad says $500 billion) — over the course of a decade. But it’s a huge exaggeration to describe that as "gutting" the enormous program. CBO currently estimates that federal outlays for Medicare will total $7.1 trillion over the next 10 years, even after the $555 billion in reductions. (See Table 1.4 of CBO’s most recent Budget and Economic Outlook.)

That’s about a 7 percent reduction in future growth, over the entire period. But spending would still continue to escalate; CBO projects Medicare will cost $929 billion in fiscal year 2020, even with the new law’s reductions in effect. That would be a 79 percent increase over this year’s estimated Medicare spending of $519 billion.

And in fact, the new law calls for some improvements in benefits. For instance, beneficiaries will be able to get free preventive care, and the new law will close the "doughnut hole," a gap in Medicare’s prescription drug coverage that currently affects some seniors. Hardly a "gutting" of the Medicare program.

There’s truth in the ad’s claim that the law will result in "reduced benefits for 850,000 Pennsylvania seniors." That refers to people with Medicare Advantage policies, which provide enhanced benefits to about a quarter of Medicare beneficiaries nationwide, at increased cost to the government. It’s true that payments to insurance companies that provide the extra perks will be shaved due to the new law. The chief actuary of the government’s Centers for Medicare and Medicaid Services predicted the impact this year:

Medicare Actuary Richard Foster, April 22: The new provisions will generally reduce MA rebates to plans and thereby result in less generous benefit packages. We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).

About 850,000 Pennsylvanians are covered by Medicare Advantage plans, so they will likely see some of their extra benefits cut, and may drop out of the program entirely. But they would still retain the basic benefits to which all current Medicare recipients are entitled.

‘Job-Killing Taxes?’

The ad further claims that the legislation contains "$525 billion in job-killing taxes." That’s not the whole story. The measure does contain a bevy of tax increases. By far the biggest is a new Medicare tax that will fall on the investment income of persons making over $200,000 a year ($250,000 for couples). In fact, CBO now estimates the increased revenue from the new law at $643 billion, having added the year 2020 to its latest 10-year forecast. (See Table A-1.) And all other things being equal, classic economic theory holds that increasing taxes will cut the amount of money available for consumption and business investment, and reduce economic growth and employment.

But whether the new law is a net job-killer or not is a larger question. The bill also contains hundreds of billions of dollars in spending — or should we say, "job-creating" spending. Millions of Americans who previously lacked health insurance will, with the help of federal subsidies, be racking up more visits to doctors, purchases of medication and use of medical procedures generally, experts say. A study by the Lewin Group estimated that the newly insured, and those obtaining improved coverage under the act, would spend an additional $281.5 billion for health services over the first 10 years.

The main worry about possible job losses due to the new law has little to do with tax increases. The law contains a requirement that employers above a certain size either provide health insurance for their workers, or pay a penalty. Economists say that’s likely to discourage hiring of low-wage workers, especially those at or near the minimum wage, because of the added cost. The same Lewin study estimated a job loss from this provision of "between 157,300 and 366,200 people." But that study didn’t examine the likely offsetting increases in employment elsewhere. A paper by John A. Holahan, director of the Health Policy Center of the Urban Institute, weighed all the possible effects and concluded that the net effect of the law on employment is likely to be small but "slightly positive."

Holahan, Aug. 6: [The law] is unlikely to have a major aggregate effect on the U.S. economy primarily because the changes in spending and taxes are quite small relative to the size of the economy; moreover, most of the effects offset each other. Increased spending will increase the demand for health services and the demand for labor in health sector. Cuts in Medicare and cost-containment provisions will have opposite effects. The net effect on employment is likely to be slightly positive because the health sector is labor-intensive.

The Hit on Boxer

Crossroads GPS says it’s spending $1 million to air a similar ad against Boxer, who’s being challenged by former Hewlett-Packard chief Carly Fiorina.

Narrator: And millions of Americans won’t be able to keep the plan or doctor they already have. Check the facts and take action. Call Boxer. Stop the Medicare cuts. [/TET]

The first charge, that Boxer voted to "cut Medicare $500 billion," mirrors the one in the ad against Sestak. As we noted above, that’s wrong. Growth in future spending of the program is being restrained to less than it would be under current law, over 10 years. But seniors’ basic Medicare benefits packages wouldn’t be cut – in fact, the law doesn’t allow it: Section 3601 says: "Nothing in the provisions of, or amendments made by, this Act shall result in a reduction of guaranteed benefits under title XVIII of the Social Security Act" (the part of the U.S. Code that establishes the Medicare program).

Next we’re told that the cuts will be "so costly to hospitals and nursing homes that they could stop taking Medicare altogether," and they "would sharply reduce benefits for some, and could jeopardize access to care for millions of others." On screen, attributed to the Washington Post, are the quotes "…hospitals and nursing homes…could stop taking Medicare altogether" and "…would sharply reduce benefits for some senior citizens…could jeopardize access to care for millions of others."

This is more complicated, and not entirely wrong. The wording comes from a Washington Post news story describing a Nov. 2009 report from Foster, chief actuary of the Centers for Medicare and Medicaid Services, on the House Ways and Means Committee’s health care overhaul bill. One section of the report (page 8) addressed a set of Medicare savings in the bill. Over time, the report said, Medicare payments to these providers wouldn’t keep up with their costs of providing services, and some of them "could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries)."

A more recent CMS report, from earlier this month, deals with the final version of the bill, which contains a similar, though not identical, provision. The assessment is similar, too, saying that "Medicare beneficiaries would almost certainly face increasingly severe problems with access to care" if Congress doesn’t act. But it also concludes that "Congress is very likely to legislatively override or otherwise modify the reductions in the future to ensure that Medicare beneficiaries continue to have access to health care services."

That’s no idle speculation, but is based on how Congress has acted in the past. Similar scheduled Medicare payment cuts to physicians have been legislated away. "Congress has overridden all of the scheduled reductions [for physicians] from 2003 to November 2010," the report says, and for the hospitals and other providers covered by the new law, "Congress would presumably act to adjust Medicare payment rates as necessary" before the providers withdrew from the program.

So it’s true that Boxer and other Democrats voted for "savings" in Medicare that the system’s chief actuary says are unrealistic and likely to be modified or reversed. But that doesn’t mean benefits will be cut. It means that the health care law is unlikely to produce the savings that Boxer and other Democrats have claimed it will.

The Doctor You Have

Finally, the ad against Boxer tells us that "millions of Americans won’t be able to keep the plan or doctor they already have." That’s true (despite President Barack Obama’s statements to the contrary). The bill is complicated; the insurance market will go through changes; and individual employers will come to different conclusions about how to react. Some may decide to stop offering coverage for their workers – a net 4 million fewer people will have employer-based coverage by 2019, CBO has estimated.

But the ad doesn’t mention that under the status quo, employers frequently change health plans due to cost or other considerations. And it doesn’t make the point that drove supporters of the overhaul effort from the start: Millions more Americans will have health insurance under the new law. According to CBO, by 2019 "the share of legal nonelderly residents with insurance coverage would rise from about 83 percent currently to about 94 percent."

And Kentucky, Too

In Kentucky, Crossroads GPS is spending $520,000 to air yet another health care ad, this one against Democrat Jack Conway, who’s locked in a fierce race with Republican Rand Paul for Kentucky’s open Senate seat.

Conway is the state’s attorney general, and he wasn’t in Congress to cast a vote on the health care legislation. So the ad is framed a little differently, attacking Conway for not joining 13 other states in suing to block the law’s requirement that all individuals have insurance.

Narrator: And Jack Conway’s gone the wrong way too. Conway endorsed Obamacare, with its higher taxes and Medicare cuts. And Conway refused to join 13 other attorneys general and defend Kentucky from Obama’s health care mandate.

Conway has indeed said he would have voted for the health care law. But the narrator’s references to "higher taxes and Medicare cuts" are misleading for the same reasons we’ve already explained. That also goes for the on-screen graphic referring to "higher premiums," which — as we’ve noted — are expected to be lower, not higher, for most.

There’s much misinformation in this trio of ads, and even what’s accurate leaves out important context. Our advice: Don’t let Crossroads GPS steer you down the wrong road.